Interview with Don Valentine
April 21, 2004
Menlo Park, California

RW: Don Valentine started his semiconductor career at Fairchild Semiconductor. Where as sales manager, he hired bright, young men such as Jerry Sanders, Jack Gifford, Mike Markkula, and many others who went on to become industry leaders. Then as a founder of National Semiconductor Don built its sales force from scratch. In 1972 he entered the venture capital field in its infancy, founding Sequoia Capital. In this 2004 interview Don discusses the factors that make Silicon Valley great and his criteria for investing.

RW: Tell us about your - your - how you got started, what your family was like, going to school? Things like that.

DV: Well, I think as with many California residents, I'm an immigrant from the East. I grew up in a community just outside New York City - Yonkers, New York - a suburban city for New York City. Went to school at Fordham University right nearby. All of my education was in the East with the exception of a - a brief stint at UCLA Business School. Interestingly, all of the schools I went to, grade school, high school and college, were all Catholic schools of - most strenuous discipline then is - is - customary. My father was a very minor union official in the Teamsters. And worked all of his life - driving - delivery trucks and participating as a minor official in labor unions. The military brought me to California in the early '50s. And I discovered that there were places where it didn't snow in your driveway. And I decided that I was not going to live in New York State any longer. I was eventually going to live in California. After the military I worked for Sylvania Electric in New York State, one factory assignment or another. They were in the cathode-ray tube business, they were in the semiconductor business, they were in the vacuum tube business. And I worked in the different divisions in New York State. But eventually evolved into sales - sales engineering, primarily again with customers in New York State, but eventually I managed to arrange to get transferred to California where I always intended to live ever since my military experience in the early '50s. So I arrived in California in about 1957 or so, and quickly identified that the future in electronics wasn't in vacuum products. Sylvania was not a significant leader in semiconductors. They treated them with some significant technical disdain. I was convinced that that was the future of components, and when the opportunity presented itself in 1959; I joined Fairchild Semiconductor in Los Angeles as one of their first salesman on the West Coast. And it was my first taste of being in a start-up company instead of a giant corporation like Sylvania. The company was so small that when we had a need for a technical assistance at one of the large customers, sometimes Bob Noyce came himself. If not Bob, Vic Grinich or one of the other founders of the company, we were so small, and committed to the customer in getting traction at being a silicon supplier of consequence. So let me pause there and find out if this is the right kind of illumination. Or should we…

RW: No, this is great. Now who were some of the other people at Fairchild in marketing and sales in - in that period?

BV: Well, the sales manager at Fairchild was a rather legendary character by the name of Don Rogers. And the marketing manager to whom Rogers reported was Tom Bay who was one of the early salespeople, maybe the first sales and marketing person that joined Fairchild in its embryonic days. So at the - at this juncture in 1959, I don't remember precisely but I - I - I think the employment level was something like forty or fifty in the Fairchild Semiconductor. So I did that for a while, eventually became in charge of sales in Los Angeles and the West Coast, then I was invited to Mountain View and replaced Don Rogers as the sales manager. Don took an assignment in a - an affiliate company of Fairchild's in Milano. He moved to - SGS and took on the sales role of integrating the Fairchild product program into the SGS distribution channels and technology transfer associated with it. So my progression in Fairchild was through the sales and marketing channel. Along the line, Charlie Sporck replaced Bob Noyce as the general manager. And I worked for Charlie up through the period in time in early 1967 when the time for the National Semiconductor spin-off - I'm trying to remember how many spin-offs there might have been before we got to National.

RW: Well, there was Rheem-

DV: Oh, there are-

RW: -was the first one.

DV: Rheem was there. Amelco was there. There were a large number of companies, none of which were especially successful. But prior to National there may have been as many as ten.

RW: Yeah. Well, now, did you hire Jerry Sanders?

DV: I hired Jerry Sanders in Los Angeles - to be initially a salesman, and then the regional manager on the West Coast. And at one point in time I had three regional managers working for me, all of whom became presidents of different semiconductor companies. Jerry Sanders started his own. Marshall Cox became the president of Intersil. And Bernie Marin became the president of AMI. So we had a very strong and powerful sales force - in the early days of the '70s, and were a very significant and dominant supplier in silicon.

RW: Well, Jack Gifford, he became president…

DV: Jack Gifford - you're right. Jack Gifford…

RW: Maxim.

DV: Jack Gifford was in product marketing, and he became president of Maxim. Mike Markkula, who worked in marketing, became the Chief Executive of Apple. I mean there are just lots of people from these Fairchild Graduate School that became major executives and presidents of major semiconductor and other electronics companies.

RW: Well, Fairchild in those days, you guys were all really young. Right?

DV: Thanks a lot.

RW: Hard working. There - pretty wild times. I mean what are - those sales conferences were legendary.

DV: The semiconductor business is an unusual business, and I've thought about it a lot from the point of view of - of why it was and is so compelling. Because skipping ahead in this story - we here at Sequoia have financed probably six hundred different companies. And it wouldn't surprise me, although we've never done the count, it wouldn't surprise me if out of the six hundred, thirty-five or forty of those companies were semiconductor companies. And if I'm erring, I'm erring on the low side. So it is a compelling business. It's a fundamental business to the digital revolution. But I'm getting ahead of myself. The reason why it was so compelling in - in my opinion, is it was a start-up, and there was the - the survival instinct of getting established a company against major competitors. Our major competitor in Fairchild always throughout the early '60s and later '60s was Texas Instrument, a hugely bigger company and a dominant supplier in a lot of way. So you had survival as motivation. You had the - the unusual competitiveness of Fairchild sales force, but the other sales forces were almost equally gladiatorial in - in their need to win. I can remember, although vaguely, my second year in sales for Fairchild - 1960 probably - 1961 - my personal sales exceeded the company's revenues the prior year. So we were growing at an incredibly rapid rate. And I think the other reason, or the last reason I may offer for the - the unusual competitive nature, the semiconductor business is a - is a terribly flawed business because where you're on the leading edge of technology and it's a process business where yields were a constant nightmare. And in those days it was very unpredictable to know what the outcome of manufacturing was going to be. And - and Charlie would always rail at me about, "Why don't you sell what we make?" And my answer always was, "Why don't you tell me ahead of time what you're going to make so I can sell it? Why don't you figure out what it is you're going to make so that -” The yield problem always caused stress with the customers, delivery problems. And it's fundamental to the nature of any process business that the yield is unpredictable. See, the Ford Motor Company puts four fenders into the production line; a Ford always comes out the other end. But when you put the equivalent of four fenders into the production line in a semiconductor company, certainly in the '60s and '70s, it was pretty unpredictable what the outcome would be. And that special ingredient which caused, I think, the - the people to become even more competitive at keeping the customer's goodwill and willingness to continue to buy and grow the company. So Fairchild exploded on the scene of the first semiconductor company to make only silicon. All the other ones, previously companies like General Electric and RCA and Texas Instruments thrived on making germanium-based products. And it's - the - the thrust of a silicon-only company was a whole new phenomenon that brought solutions that didn't previously exist in germanium. So we found phenomenal reception in those early years of launching the company. So I ended up being the sales manager of the company for a period that I think I measure more in dollars than in years. We went during my tenure from about twenty million or twenty-five million to a hundred and fifty million. A hundred and fifty million was sort of around 1967 at which time National was the target for a nucleus of people from Fairchild, and we left to take over what in fact was an existing company, an existing public company which had very little product, very little profitability and not very much momentum. And I remember when I was leaving in 1967, Bob Noyce in the interview said, "You know, it's really too late to start a semiconductor company, Don. Why don't you just stay here? We're doing exceptionally well. We'll make it better." And I said, "No. My - my destiny is to move on." The anecdote that I remember in 1969 when Bob was leaving to start Intel, I called Bob and I said, "Bob, two years ago you told me it was too late. How come you're leaving in 1969 to start the semiconductor company?" So he very graciously invited me to join him at Intel. But this was a - a period of significant instability looked at negatively, but looked at positively a period in time when a huge number of companies were being started in Silicon Valley. Arthur Rock was an in - an original investor in Fairchild. At National, a man by the name of Peter Sprague, and a local investor by the name of Don Lucas were the primary financiers of arranging the financing for National. National was - was - probably more a turn-around than a start-up, although everybody thinks of themselves as a founder, and everybody thinks of themselves as - as beginning National. National was a modestly thriving, small Connecticut-based semiconductor company making fairly simple transistors and very little in the way if integrated circuits. Two people had left Fairchild prior to the Sporck group, and - they were Dave Talbert and BobWidlar, who had created the linear circuit product line at Fairchild, and at one point in time were responsible - one designed them and one made them - for more than eighty percent of the linear circuits made and sold in the world. This was a phenomenal duo of highly eccentric - or whatever the word is beyond eccentric - individuals, and we were all reunited at National and located in Santa Clara. And this was a - a very heady time in the late '60s, starting all over again having to reinvent a different way to do sales, having to operate with a - a company that had no treasury and negative cash-flow.

RW: Well, National became the premier linear company, if not. And Fairchild was sort of limping around - along.

DV: Fairchild, when they lost Widlar and Talbert, they lost the core nucleus, of course they took other people with them, of their linear circuit creation department, both in - in design creation as well as fabrication. And the pair started over prior to Charlie and the rest of us, and created a whole new bunch of linear circuits establishing National to this day. Almost forty years later as a premium supplier of linear integrated circuits. No question that that was our original success, and I don't think any product line that National had as long as I was there or even after I left was anywhere near as successful as the linear circuit product line. Phenomenally user friendly and very useful to the customers, and massively profitable. So it was a - a great reunion getting back in business with Widlar and Talbert.

RW: What - how was the culture different at National than at - at Fairchild?

DV: Well, Fairchild, interestingly, was formed almost exclusively by scientists. Noyce, Gordon Moore, Jay Last. A lot of them were - were really research and development people, and not very much experience, understanding or possibly even interest in manufacturing. And Sporck by comparison started National with a hard-core nucleus of manufacturing people. Fred Bailek, Pierre LaMonde, clearly were Talbert's match in manufacturing. So the companies were started very differently - and - and with entirely different types of individuals. It is interesting how manufacturing intensive and capable Intel became. I think somewhat out of necessity recognizing that just science would not carry the company to any great size. So National is much more of a hard-core, figure out how to make them - make them in great quantity, make them in Asia, do what ever it takes to change the traditional model of the semiconductor business being an esoteric business used - products used only in military and exotic kinds of applications, and to make it a much more ubiquitous product using lots of consumer as well as military kinds of applications. The character of the company has, I learned even more during the Sequoia days, is almost totally determined by the nature of the individuals that start it. It is not an accident that Intel initially became a derivative of Fairchild, started by scientists, led by scientists, and a company that developed a huge number of basic patents in memory device areas long before they launched into the microprocessor business. And only later did they again develop the manufacturing know how to compliment their incredible development skills. So I did National from 1967 to about 1970. Why would I possibly leave, we were really on a roll. Well, I had done Fairchild as more of a rollout than a start-up. I went - I was there from - as I indicated from twenty to a hundred and fifty million. What I wanted to do was a basic start-up. And when we joined National their revenues were insignificant, and by the time I left in the early '70s they had a revenue - a run-rate of fifty million. So I had done what I wanted to do. And by accident, somewhat a - a feature of the fact that when National became a prominent and desirable company to meet with and talk with, Charlie never had very great interest in giving talks or meeting with financial people or the stock market people. And I did more of that than I ever anticipated. And in doing that I met an organization that is still one of our investors after thirty years, an organization in Los Angeles by the name of The Capital Group, that manages the American Mutual Funds. And they were launching a business in the creation of a trust company, and their clients - their initial clients were interested in having as an element of their investment relationship, they wanted to be in the venture capital business. So I was invited to join that start-up and create a venture capital company which would be part of The Capital Group and part of this new trust company that was starting. And that's how in the early '70s - around 1971 is when I really started - how Sequoia was started. While at Fairchild, and more so at National, I began investing privately in small companies, some of which were customers of both Fairchild and National. They - they didn't require much money. I didn't have very much money. Fortunately, our - our checkbook size and appetite were coincident. And I made a number of investments in small companies before I started Sequoia. So it was a - a derivative experience of what I did when I was at Fairchild and National. The interesting thing is not a lot has changed. At Fairchild and National my interest was investing in companies that were addressing very large markets and solving a specific kind of problem. At National we had limited resources - limited engineering resources, we couldn't do everything for everybody, so one of the disciplines we had to develop as custom circuits began to evolve was to figure out which companies to choose our limited resources and which ones to decline, to not try to do business with, to try not to solve their problem, and out of that period of four or five years I hammered out this more intuitive investment selection process based on huge markets and solutions that made a significant short-term commercial sense. Six hundred investments, thirty-odd years later, we're still using basically the same selection criteria in choosing companies that have huge, huge markets. It turns out it's much easier to build a new start-up company in an environment where the markets are large than it is to try to develop a market based on some technology for which there's not an obvious solution. And that's been sort of the approach we've continued with which I stared somewhere about 1967 or so.

RW: Well, now were - was Sequoia one of the very first of the venture capital firms?

DV: It was. Obviously, Arthur Rock preceded us, but it's an interesting period to touch on briefly. Arthur Rock worked for a company in New York - Hayden Stone - where he was in a financial advisory capacity. When approached for financing through an intermediary who - who connected Bob Noyce and company with Arthur, Arthur had no dedicated pool of money. He went out and raised the money from institutions. And that's how venture financing was sort of done in 1960. There weren't dedicated pools of money. There weren't large fortunes that were interested in doing this. So Arthur began more as an agent than a principal in an investment company. By the time I encountered Arthur he had started a partnership with a man named Tommy Davis. And this is one of the first firms that had gone out and raised money from largely individual investors. So when Davis & Rock was started it was - this is all by guess and recollection. Arthur knows, obviously. But it was somewhere around 1965 or 1967, somewhere in there. And that was the beginning of the insitit - institutionalized venture capital business where funds were dedicated specifically to starting companies, small numbers of dollars as a limited number of practitioners. So when I began in 1970 there were very few people, very few funds, not very many companies were being financed, and it used to take almost all of us combining our check writing capability to start a company. Nowadays funds like ours have hundreds of millions of dollars in each partnership. So it's changed a great deal.

RW: Well, do you - do you think that that as one of the successes of Silicon Valley, the availability of venture funds?

DV: There is no question. It's very difficult. And over the years we've been visited by hundreds of people from every country in the world, almost all of the states in the country. They all want to figure out and clone what causes Silicon Valley to exist and thrive. Many or most of the visitors are interested in the underlying employment creation. But if you look at venture capital, it only works two places in the world. It doesn't work outside the U.S., and it only works in Boston, or the greater Boston area, and in Silicon Valley. Basically, almost no other major financial center in the world has ever generated companies of consequence and providence that is so large and visibly successful. And you can blame it on the weather. You can give credit to the great universities. You can explain that the venture community here is stronger and more experienced than other parts of the world. But the mystique of why it works is still very hard to narrow down to six or seven simple declarative sentences. And it - it is a local bit of magic that - works at this particular point and time. The duration of the venture industry is probably only from something like 1960 through the present, so you talk about not even half a century. It - it's still a new and - and sort of closet-like form of financial engineering. We don't think of it as investing at all. We think of it as building companies, often times building industries. And it's an entirely different mentality and attitude than in the traditional idea of buying and selling things. And this is not a place where you buy things; this is a place where you build things. And you participate in the founding team that creates an entirely new company and sometimes a new industry. And now there are far more practitioners. But if you go around the world, the Research Triangle in North Carolina was going to be another magic spot. Well, you can't name a great company, it’s never been started there. You can look at other centers. Seattle - well, there is a great company there. Maybe there are two great companies there - they include Nike. And - has anything happened in the last twenty-five years in that community other than Microsoft and Nike? And the answer is not a lot. Lot's of companies have started. Lots of things going on, but not a lot of monumental success. I mean it's unbelievable the number of companies that have gained prominence, have revenues of a billion dollars in this tiny, little valley. So it is a bit of enigma what all the ingredients are that everybody would like to clone and take away. I once tried to explain to the Deputy Prime Minister of Singapore who was here trying to take back the magic, and I said it's a state of mind. You can't take it back. Somehow or other you'd have to move your people here and they would have to have their DNA changed so that when they went back to Singapore, there was a DNA adjustment in the way they thought, the way they were willing to take risks. I mean in a place like Japan, if you start a company and it fails you're disgraced. Some people would commit suicide - if that happened.

RW: It happened.

DV: And here - you - you start a company and you fail, some of the best people are better after their failure than before their failure. So you don't have the stigma of failure. In Ireland, I can't imagine with jobs so hard to come by, somebody would leave a good job in a country like Ireland to - to run the risk of their company failing. And a place like Germany, it's so rigid you'd be socially ostracized, I suspect, if you started a company and - and it didn't work. Environmentally here - the other ingredient I forgot to mention and it's more true now than it ever was, the - the community is built up of emigrants and immigrants. So almost all of the people who have started or participated in starting these great companies have come from some other state. Noyce was from Iowa. Went to Grinnell College. And there’s a - Gordon Moore might be an exception of somebody who was born in California. So we have a whole history of emigrants coming from all over the country, and in the last ten years more than ever, we have a huge population coming from Southeast Asia. It - a month doesn't go by where Sequoia doesn't start a new company populated by Indians. Fabulously educated, brilliant entrepreneurs, they come from an economic system that is so different from ours it's hard for me to understand it, although about once every two months I get a lecture from some entrepreneur who says that you don't even understand your own system. You don't understand how unique it is and - and then the fact that it doesn't exist anywhere else in the world. So there is something here that is - that is different as perceived by the people who purposely immigrate here.

RW: Well, in 1980 you were the lead investor in LSI Logic. What was your rationale behind that investment?

DV: Well, for those in - whoever watched, LSI was yet another semiconductor company. It's a business that we know. It's a business in which we are among very few recognized experts at starting companies. It was a different approach to the type of product that had been made previously. Most of the earlier days prior to 1980 the semiconductor industry either was made up of pretty standard products which you bought off the shelf, or on occasion a custom product which took a long time to make, was very, very expensive, and represented a very, very small percentage of the so-called customized circuit. LSI Logic's program product - excuse me. LSI Logic's product was a programmable product that allowed the customization of what the customer really wanted and didn't find in the off-the-shelf products, something that he could realize his dream by only having to vary how the product was made at the end and not from inception. So we believed this form would allow many customers to seek what they allegedly wanted, which was a highly specific custom product proprietary to them, different from what was available commercially. And we felt that that kind of a product would find applications in both military and commercial kinds of environments which would allow building a major company. The second thing that was important to us, and we've always believed this at Sequoia, we would much rather finance someone who has failed in their prior company than somebody who has succeeded outrageously in their private - prior company. Most people who succeed are not very objective or realistic about why. They think it's all their personal brilliance. And in significant part it is, but they forget the luck factor and the contribution of other people and timing and the economy and all the rest of it. People who fail often times are desperately in need of a success. They're smarter, they're more clever about how they do things, their sometimes tremendous egos are suspended in check. And in my opinion, when we encountered Wilf Corrigan in the late '70s and 1980, he was at a point in time where he really needed a success. He was a very ascendant star at Motorola, joined a group of people who came to Fairchild to take over and run this mighty company in the West, and I think he found it more difficult than he ever anticipated, and it was never a very successful company after Bob Noyce left it. And I think when I encountered Wilf, whom I had known, he was at a point in his life where he had really distilled his thinking far better, had his ego in some realistic check, and we loved the fact that he had failed before, and could talk about it and could explain what he had learned from his prior company and why it hadn't worked. So we rarely will finance somebody at Sequoia who's had an outrageous success. My - my best example is my friend Steve Jobs. We financed Steve in 1977 at Apple. Steve was twenty, un-degreed, some people said unwashed, and he looked like Ho Chi Min. But he was a bright person then, and is a brighter man now. And here was a man that created Apple, and in the creation of Apple helped create the personal computer business. Phenomenal achievement done by somebody in his very early twenties. Outrageously success - successful, and after he - his stay at Apple he then evolved to an individual who was having lunch with the governor of California, then Jerry Brown, who had an apartment in New York City. When I met him he didn't know where New York City was. So he had moved on to a different plateau of interest and distractions. His second company was easy not to finance because it was all about vengeance. He had been the victim of a Board battle with the Pepsi Cola salesman he had hired to run the company, John Scully. And the Board chose John Scully. Steve was, I think unceremoniously exited, and his comeback company was a get-even company. Well, I don't believe you make money, create great companies based on vengeance. And his second company was sort of the - the result of a distracted visionary. As a visionary, Steve was the equal of Noyce. I have only met and known two visionaries in my life. Lots of people in Silicon Valley think they're visionaries. Noyce was one. Steve was the other. And it's very difficult. Bob was one of those people who could maintain perspective because he was inordinately bright. Steve could not. He was very, very passionate, highly competitive, and when he was ousted, he was dying to get even. Well, it's come full circle. He's gotten even. He runs Apple again. Unfortunately, now he has three percent market share, struggles for profitability, is an infinitely better product than is produced by anything that runs Microsoft. But the world no longer is open-minded about that particular kind of product. An interesting saga of - a - a complete circle in Silicon Valley within less than a dozen years.

RW: Well, you know, speaking of - of the venture capital community, you were on the Board of LSI Logic.

DV: Yes.

RW: And is - isn't there an inherent conflict of interest with a venture capitalist sitting on the Board of a - of a - of a company of a start-up?

DV: Well, it's an interesting question. I haven't thought about it being a conflict of interest. So while I explain why we do it let me think about why anybody would think it's a conflict. Most of the time and maybe LSI can be put in the exception can, most of the time the companies we finance are more started by people like Steve Jobs who's twenty and has no prior management experience. Fewer by comparison have started by someone like Wilf Corrigan who has lots of prior management experience. So we find ourselves often times financing companies where the average ages - of the founders are less than thirty. So as a consequence, they haven't had very much experience doing anything. And we view ourselves as the source of talent, the source of, through our contacts, other kinds of capabilities. The typical entrepreneur we do business with does not know how to rent a building. He doesn't know what the purpose of an accountant is. So we facilitate building an infrastructure of service-like capabilities that facilitate rolling out the company and eliminating the - the founders to learn about things like this because you just introduced them to a great lawyer, a great banker, a great search firm, a great accounting firm, you facilitate buying or renting a building, you make all of these things nice and easy for people who have never done it before. So if I were to just stop there and rethink about your question…

RW: Let me, let me be…

DV: Well, that's your conflict.

RW: I - what I - what I was thinking of is that in - in the - in the various funding rounds, and including the IPO, I know there was - when we IPOed in '83 it was very large. It was over a hundred and sixty million dollars. And there was - there was criticism that it was too much and therefore the stock was not going to - not going to have a bounce. And that was absolutely true because the stock was - was below its initial price for many years afterwards. Five, six seven years it was under the twelve dollars. So on the other hand we got the maximum amount of cash that we could. So it seems to me that there is some sort of a conflict between a venture capitalist who would like to have that steady growth in the stock value versus the entrepreneurial that would like to get the most cash they can for that rainy day.

DV: Yeah, I guess I understand your question better with that example, although I have a hard time embracing the logic. Going public from our point of view is just one step in the way of building a company. It's one more financing. So when you do a company like LSI Logic, you do a private round or two which helps the company get to some level of achievement. Raising money publicly instead of privately is still raising money, and the more money a company can raise with minimal dilution is beneficial long-term to the shareholders. It's not beneficial to the traders. And I don't think company building should be oriented toward people who trade stocks before breakfast and after lunch. Companies like LSI Logic deserve shareholders who are interested in being shareholders long-term. So by raising a little more money, LSI Logic took one of the major risks out of the enterprise being successful. There was no way the company was going to fail for lack of financial where-with-all. So from a shareholder point of view, we have now taken a huge step in providing a very stable, long-term company that the shareholders could be comfortable, and patient shareholders of, waiting for it to reach ever higher levels of sales and earnings. I - I have no difficulty reconciling being on both sides of that transaction. Being part of a venture financing team, being part of the board, and being part of being a long-term shareholder.

RE: Another question about semiconductors. Does it make any sense anymore to manufacture, or did it ever make any sense to manufacture semiconductors? With - with factory costs now in the billions of dollars and having an effective lifetime of under ten years. How many - how many manufactures of semiconductors will there be left in the U.S. in the next ten years?

DV: Well, as with a lot of things, things have changed. When we started at Fairchild or National there wasn't any choice. Either you manufactured and assembled your semiconductors or you didn't have any. In 1963 Fairchild opened a factory in Hong Kong. I was the - the Fairchild representative at the opening. It was one of the first times a company had decided to assemble semiconductors in a large way anywhere remotely distant from the core manufacturing of the wafers. And it was just the beginning of what was a long-term logical trend to outsourcing. Now, jumping forward forty years, there clearly are very, very few wafer fabrication manufacturers than there were simply because the cost of the facilities are so large. Even large companies like IBM share the cost of them with other major corporations because, you're correct, the obsolescence issue is so great. So you've had nothing different than the automotive industry where you've had consolidation in manufacturing. Probably in 1910 or 1920 there were a hundred car manufacturers in the - in - in North America. Well, now you sort of have two American car manufacturers, one German car manufacturer, and three or four Japanese car manufacturers. So things change as the consumers change and as the cost of manufacturing changes. Do I envision a point in time where there are no semiconductor fabs? No, I don't think that will happen in anybody - certainly not in our lifetime, but I can't imagine what would replace a semiconductor or semiconductor-equivalent kind of a basic product.

RW: Well, if you invest today in a semiconductor company, those - those circuits are actually manufactured offshore in most cases.

DV: That's true. And Intel is one of the major exceptions that interestingly has not put a manufacturing factory in California for a lot of reasons for a long time, but have them in contiguous states; New Mexico, Oregon, Arizona. They're very comfortable at manufacturing and investing in major facilities in the Western U.S. with the exception of California. Most of the fab come - the semiconductor companies we started are fabless. And we buy our wafers from companies in Asia, historically from Taiwan, a little bit from Singapore. But in the next five years many of the wafers will be made in Mainland China, and we will buy them from there. IBM is another example of having resident manufacturing facilities in New York State. But I think these are exceptions. And clearly the rule will be offshore investment in fabrication plants, maybe at some point in time in India because you'll have a - a large core of capable people who can make advanced semiconductors from their educational system. But no - starting LSI Logic in 1980 was a challenge because that was somewhere near the inflection point when it became too expensive to buy the equipment and we had to conjure up a different solution of arranging for a corporation to guarantee a lease-line for us to buy the capital equipment to make wafers in California in 1980, and that's almost twenty-five years ago. I don't think we'll see that change anywhere near in the…

RW: It's - it's a - it's a crazy business. I - I wonder if you look at - at all the profit and loss of all the semiconductor companies over time whether it's been positive or positive retained earnings.

DV: Oh, there's no question in my mind that it's - that it's clearly overwhelmingly product - profitable. This is not the airlines business where they have never made an aggregate product since the history of the airplane was invented. The story that I like retelling is not my story. I was at an event one night when the - the great investor of Omaha was explaining why and how he never invested in airlines. And he said, "Well, there are just too many. It was very difficult to - to pick out which ones were the good ones and which ones were the bad ones." And he said further that if you look at the history of the airlines from 1950 to the year 2000, revenues were in the trillions, but the aggregate profitability was negative. So he said there - there was an obvious solution that we missed. In 1903 we should have shot the Wright Brothers. Seems like an extreme solution to a basic problem, but the airlines, there are lots of businesses that - that categorically make very, very, very low returns. And it's surprising to me why they attract sometimes exceptionally qualified and bright people. Mystifying. Why would you want to run an airline? Every ten years or so you have to declare bankruptcy so you can deal with your labor unions. And it - it does seem like it can't be fun.

RW: Well, Don, any final words here for the Stanford audience on - did you - did - you had some children at Stanford, did you not?

DV: We have two sons who have gone to undergraduate school at Stanford, one of whom also went to graduate school at Stanford. That was back about 1985 or ‘86 that they graduated. So they're coming up on twenty years shortly. Demonstration of how fast time flies. The other son went to graduate school at Berkley, which is the other great school in the local community. What final words. Well, last year I had appeared as a speaker at an organization called TAI, which is a local Indian entrepreneurial society helping people from that community start companies. And the big question on their minds was is it too late? Is Silicon Valley over? Is Camelot ended? Should I go somewhere else? So I spent forty-five minutes trying to allay their fears, explain that the basic infrastructure that caused it to succeed since 1950 or '60 was still intact, and we had yet another phenomenal new ingredient that we didn't have in the '60s and '70s. We didn't have you. We didn't have you undergraduates from ITT. Excuse me. IIT I guess it is. We didn't have anybody coming to our companies from the campuses of IIT. So we have yet another ingredient to insure the future and continued success of Silicon Valley. We now have a whole new source in international Southeast Asian students that are populating - Chinese and Indian people populating the new companies. I think if anything the - the nature and quality of these entrepreneurs are every bit as good as any prior entrepreneurs. I don't know if I persuaded any but I got a lot of business clients.

RW: Well, thank you, Don.